How YouTube Became Google’s Inroad To Big Brand Budgets

Its decision to remove YouTube inventory from the DoubleClick Ad Exchange (AdX) by the end of the year is one more way it hopes to clinch a piece of TV’s $70 billion portion of the overall brand budget.

Platform providers were understandably upset when Google revealed the news late last week, but some like Turn's Maureen Little, predicted only brands would hold the keys to any sort of reversal on Google's part.

“If YouTube is right for you and you need to reach millennials through video, YouTube offers some really compelling ways to buy it,” he said.

One media agency exec who works at a Google Preferred partner agency and asked to remain anonymous supported Henry’s views.

“From our perspective, premium content at scale – informed by rich data – is a positive,” that source said, “and the fact that a majority of what we purchased was not via AdX supports the premise that accessing through different means – e.g., direct, our programmatic team, MCNs – delivers positive results."

These sentiments are unsurprisingly welcome to Google, who recently claimed the percentage of top 100 brands buying video ads on YouTube was up 40% YOY.

“Obviously Google owns the bottom of the funnel, but it knows the only way it’ll keep growing is effectively going after the other $300 billion – brand advertising,” said Henry. “They want to make it a very good environment for TV advertisers.”

Google, with more than 1 billion unique video views a month and 300 hours of video uploaded each minute, can provide more scale to TV advertisers than other video platforms.

But because user-uploaded cat videos aren’t the premium content advertisers and agencies covet, Google offers a brand-safe TrueView skippable format, which is sold on cost per view and is billable only after 30 seconds of viewing or upon completion, whichever comes first.

TrueView grew to represent 85% of all YouTube video ads at the same time Google launched premium programs like Google Preferred. It positioned these programs as the top-performing 5% of YouTube inventory, and managed to secure upfront commitments from agencies OMG, Digitas, IPG, Carat and Starcom.

“Given their unique scale, they can make exclusive promises – upfronts – that others can’t,” commented Dave Morgan, founder and CEO of Simulmedia. “Basically, Google is trying to make YouTube more like TV – an exclusive product in a clean, well-lit environment managed by a white-glove sales and account management team.”

YouTube is trying to drive sales lift by enabling buying and mobile functionality in its formats. These efforts include shoppable TrueView ads and 360-degree TrueView ads (Nike, Coca-Cola and Bud Light are experimenting with them).

Google’s push to add greater functionality to YouTube ads, according to Henry, is not entirely isolated from its exerting more control over its own inventory.

For instance, TrueView for Shopping ads were designed to foster the full purchase funnel in a single video. Brands like Burberry are testing interactive cards through unique overlays on TrueView ads to drive consumers to behind-the-scenes content on microsites and beyond.

“Because of the way trading desks were historically set up, they were all about efficiency and reach and low cost,” Henry said. “If they were buying YouTube inventory, they were usually adding it on as another inventory source. This is Google’s way of saying, ‘Even if you’re running programmatic, [YouTube] deserves discrete focus.’”

Sam Cox, VP of OPEN global media partnerships at MediaMath, said it is Google’s prerogative as a publisher to provide the best experience possible for advertisers and their users while generating as much revenue as possible, despite any concerns around interoperability with the broader ecosystem.

“I think it’s about TV aspirations and generating scarcity and competitive differentiation for DBM,” Cox said, “but it’s also a reaction to general changes in the media landscape where we’re seeing buying psychologies change.”

For instance, when there are multiple intermediaries involved in an exchange-based transaction, “you have technology companies that look a lot like agencies and networks that take no principal risk,” Cox added.

Then there are nefarious players – at times, subsyndication networks who purposefully drive up impression volumes with formats like in-banner video – which ultimately hits the end publisher’s wallet.

“With all of the noise around viewability and bots and fraud, I suspect that YouTube doesn’t want to take any chances of having their inventory bundled into campaign packages by others containing less savory types of inventory,” Morgan added. “They have massively more scale than any other digital video competition, and more consistency and much tighter controls over the inventory than others.”

Morgan’s hypothesis speaks to recent moves by brands like Kellogg, who have promised to reduce their video investments on YouTube and Facebook unless they allow third-party viewability verification.

“Ultimately, as those lines [between platform, agency and network] become clearer,” Cox said, “I think you’ll see Google opening up a little more.”